IDB confident of using its first Ringgit-denominated Islamic bonds in two years

By Mohamed Arshi Mat Daud, NNN-Bernama

Kuala Lumpur : The Jeddah-based Islamic Development Bank (IDB) is optimistic that proceeds from its upcoming first offering of Malaysian currency sukuk (Islamic bonds), a 500 million Ringgit (one USD = about 3.19 Ringgit) issue, will be fully utilized within two years.


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“Insyallah (God willing), in less time than that,” IDB President Dr Ahmed Mohamed Ali said here over the weekend when asked whether proceeds from the Islamic bond could be fully used to finance projects within two to five years.

The multilateral development financing institution expects to issue the sukuk in Malaysia in two to three months’ time.

“Most of the amount will be invested in Malaysia and if there is any excess, it may be utilized outside the country,” he told Bernama in a recent interview.

Dr Mohamed Ali disclosed that IDB had identified several projects in Malaysia that could be financed using the proceeds from the sale of the sukuk and was looking at issuing more Islamic bonds in Malaysia.

The director of the IDB’s Kuala Lumpur regional office, Ahmed S. Hariri, said a large portion of the 500 million Ringgit sukuk would be for financing projects under a 100 million USD to 150 million USD (RM320 million to RM480 million) allocation the bank had set aside for Malaysia this year.

The bulk of the allocation is aimed at investments in projects in two of Malaysia’s five recently launched economic corridors — the Iskandar Development Region in the southern state of Johor and the East Coast Economic Region covering the East Coast states of Penin sular Malaysia.

“We are in contact with the corridors’ promoters, Khazanah Nasional (Malaysia’s national investment corporation) and Petronas (the national oil and gas company),” he said.
“Our focus is on education, health and basic infrastructure.”

Should the proceeds from the sukuk be fully used up within two years, the IDB would not hesitate to issue a new and a larger Ringgit-denominated sukuk, said Hariri. “Definitely yes. Why not?,” stressed Hariri.

However, he added that it depended on the needs and the availability of projects that required financing at that time.

On another note, Hariri said the IDB was attracted to issue the Ringgit sukuk in Malaysia because of the country’s success and experience in raising Islamic bonds for both corporations and international organizations.

“The system and the procedures available through the Securities Commission and Bank Negara Malaysia (Malaysia’s central bank) are well and intact, giving us the trust and confidence,” he added.

He also said that the RM500 million sukuk would be the bank’s fourth issue of Islamic bonds as it had previously issued three sukuk in the international market.

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